Q3 Interim Financial Report

Transcription

1 b Q3 Interim Financial Report 2018

2 VV Holding AS Q3 Report 2018 Page 2 TABLE OF CONTENT DISCLAIMER... 3 PRESENTATION OF THE GROUP... 4 COMMENTS BY THE CEO... 6 KEY FINANCIAL FIGURES... 8 RESULTS OF OPERATIONS... 8 FINANCIAL POSITION OPERATING AND FINANCIAL REVIEW UPDATE OF MATERIAL RISK FACTORS AND EVENTS AFTER REPORTING PERIOD CONDENSED INTERIM FINANCIAL STATEMENTS NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS RESPONSIBILITY STATEMENT APPENDIX 1 - ALTERNATIVE PERFORMANCE MEASURES CONTACTS... 30

3 VV Holding AS Q3 Report 2018 Page 3 DISCLAIMER VV Holding AS is providing the following interim financial statements for Q to holders of its NOK 1,386,000,000 Senior Secured Floating Rate Notes due This report is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy the notes or any other security. This report includes forward-looking statements that are based on our current expectations and projections about future events. All statements other than statements of historical facts included in this notice, including statements regarding our future financial position, risks and uncertainties related to our business, strategy, capital expenditures, projected costs and our plans and objectives for future operations, including our plans for future costs savings and synergies may be deemed to be forward-looking statements. Words such as believe, expect, anticipate, may, assume, plan, intend, will, should, estimate, risk and similar expressions or the negatives of these expressions are intended to identify forward-looking statements. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. You should not place undue reliance on these forward-looking statements. In addition, any forward-looking statements are made only as of the date of this notice, and we do not intend and do not assume any obligation to update any statements set forth in this notice.

4 VV Holding AS Q3 Report 2018 Page 4 PRESENTATION OF THE GROUP The Norsk Gjenvinning Group is Norway s leading recycling company offering a wide range of sustainable waste management services and providing secondary raw materials. Norsk Gjenvinning is present in two markets; upstream and downstream; In the upstream market, Norsk Gjenvinning provides waste management services to local businesses, the municipal sector and private households in Norway, Sweden and Denmark The downstream markets consist of production/pre-treatment and sales of (i) secondary raw materials, such as recovered paper, plastic and metals to commodity producers in Scandinavia, Europe and Asia and (ii) fuels to waste-to-energy customers in Norway and Sweden The Group s vision is to turn waste into the solution for tomorrow s resource problems. The Group s mission is to work tirelessly to become the industry s most customer-oriented, efficient and profitable player, with the goal of being perceived as the most important recycling company in the Nordic region. The Group s operations are based on our four core values; salesmanship, proactivity, responsibility and team spirit. The Group has approximately 1,200 employees, over 40,000 customers and handles 1.8 million tons of waste per year 39% of which goes to material recycling, 46% to energy recycling and 15% to landfill and other. The following illustrates the Group Structure: The Group s structure consist of the following business areas: Recycling: Operations include customized solutions for collecting, sorting, handling and management of all types of waste, together with related services. Metal: Operations include collection, sorting and treatment/recycling of all kinds of ferrous and non-ferrous metals, including vehicles, cables, and electrical waste Project businesses: Operations consists of demolition, a broad spectrum of industrial cleaning services and operation of landfills. Household Collection: Operations consist of collection of household waste on behalf of Norwegian and Swedish municipalities. Other business areas: Operations consists of i) downstream sales of recycled materials, processed waste and trading and ii) secure handling and destruction of documents The Norsk Gjenvinning Group is controlled by funds managed by Summa Equity.

5 VV Holding AS Q3 Report 2018 Page 5 Consolidated companies: VV Holding AS (Issuer) Norsk Gjenvinning Norge AS 100% Norsk Gjenvinning AS 100% Norsk Gjenvinning Downstream AS 100% Norsk Gjenvinning Metall AS 100% Norsk Gjenvinning Miljøeiendommer AS 100% Norsk Gjenvinning Offshore AS 100% Norsk Gjenvinning Renovasjon AS 100% Norsk Makulering AS 100% Nordisk Genanvendelse aps (DK) 100% Nordisk Återvinning Trading AB (SE) 100% Nordisk Återvinning Service AB (SE) 100% Norsk Gjenvinning Renovasjon Service AS 100% NG Vekst AS 100% Humlekjær og Ødegaard AS 100% IBKA Norge AS 100% IBKA A/S (DK) 100% IBKA AB (SE) 100% IBKA UK Ltd (UK) 100% Løvås Transportfirma AS 100% Tomwil Miljø AS 100% Wilhelmsen Containerservice AS 100% Ødegaard Gjenvinning AS 100% LST AS 100% isekk AS 100% Norsk Gjenvinning M3 AS 100% Asak Massemottak AS 100% Løvenskiold Massemottak AS 100% Kopstad Massemottak AS 100% Borge Massemottak AS 100% Solli Massemottak AS 100% Norsk Gjenvinning Renovasjon Ressurs AS 100% Norsk Gjenvinning Renovasjon Stab AS 100% Metall & Gjenvinning AS 100% Rivningsspesialisten AS 100% NG Fellestjenester AS 100% Adact AS 100% NG Startup II AS 100% NG Startup III AS 100% NG Startup X AS 100% Revise AS 100% Ownership <100% R3 Entreprenør Holding AS 81.25% R3 Entreprenør AS 81.25% Østfold Gjenvinning AS 66% Mortens Rørinspeksjon AS 50.6% Eivind Koch Rørinspeksjon AS 50.6% If not explicitly mentioned otherwise, the financial information contained in this report relates to the unaudited financial information on a consolidated basis at the Issuer level for the nine months ended September 30, 2018 and September 30, 2017 respectively.

6 VV Holding AS Q3 Report 2018 Page 6 COMMENTS BY THE CEO In Q3 lower downstream prices due to Chinese import restrictions continued to have negative impact on Division Recycling and Division Metal, although we see signs of stabilisation. The healthy performance in the Project Based Businesses with strong top line growth and increased margins continued during the quarter. The contracts that were taken over following the bankruptcy of Reno Norden continued to put pressure on profitability in Household Collection. We are working continuously to further strengthen our results through volume growth, gross margin management and increased operational efficiency. We maintain our guiding for 2018 and expect a continued recovery and positive results development for the group in the fourth quarter of HIGHLIGHTS Q3 and YTD 2018 Volumes: Reduction in waste volumes compared to Q by 3.2%; YTD waste volumes are down by 0.3% Operating revenue is up 2.2% compared to Q3 2017; YTD adjusted operating revenue is up by 6.3% Gross profit is up by NOK 20.4 million compared to Q3 2017, and YTD adjusted gross profit is up by NOK 66.6 million Adjusted gross margin is up by 0.8 percentage points compared to Q3 2017, and down by 1.0 percentage point YTD Adjusted EBITDA is NOK million, down by NOK 28.9 million compared to Q3 2017; YTD adjusted EBITDA is NOK million down NOK 83.9 million Our aim is to be a leading service provider to customers in demand of waste solutions (the upstream market), the most efficient supplier of recycled raw materials to customers in Europe and Asia (the downstream market), and a leading provider of project based recycling businesses. Leading service provider to upstream customers in demand of waste solutions In our upstream markets, we are working diligently to improve our position through increased service quality, more effective sales, improved pricing, more innovative solutions, and increased efficiency of our inbound logistics. In Q3, waste volumes decreased with 3.2% year over year. The main reason for the decline was lower ferrous volumes within the Metal Division. In the Recycling Division volumes decreased with 1.0% in Q3 mainly due to lower paper volumes as a consequence of the fire at Haraldrud earlier this year. Collection assignments were down 5.2% driven by compactor runs, while other logistics activities were up. Gross profit increased with NOK 20.4 million in Q3. Ytd the increase in gross profit was NOK 66.6 million adjusted for real estate transactions in the first half of For the quarter, gross margin was up from 49.7% in Q to 50.5% in Q Ytd the gross margin adjusted for real estate transactions was down from 50.3% ytd in 2017 to 49.3% ytd in The ytd reduction was explained by the continued challenging dynamics in the paper and metals market. Paper prices bottomed out in Q2 and have increased somewhat since then. The prices related to packaging grades OCC and mixed paper were stable during Q3. However, the prices related to these fractions were far below the levels in Q3 last year, which affected gross profit growth negatively in Q3 this year. Deink grades for printing paper have seen a sharp increase in Q3 and are now back on the level we saw early in 2017, but still lower than in Q The Chinese continued with their import restrictions related to metals in Q3 effectively closing the Chinese market, which lead to a decline in global downstream prices during the quarter. For mixed metal scrap there was a continued price discrepancy between upstream and downstream markets due to the sudden changes in the downstream market. This is expected to be a temporary imbalance resulting from a lag in upstream price adjustments.

7 VV Holding AS Q3 Report 2018 Page 7 YTD volumes were down 6% and 16% for ferrous and non-ferrous respectively. Still, the main cause of lower profitability was lower gross margin on mixed metal scrap. The growth in volumes is expected to be more positive going forward. In addition to targeted efforts to improve gross margins, we continued our focus on efficiency improvements in sales and inbound logistics. Going forward we expect to see solid operational improvements and efficiency gains in our upstream operations. The most efficient supplier of recycled raw materials to downstream customers Through our industrial value chain from our plants to the downstream markets, we are working systematically to improve our position as the most cost efficient supplier of high quality recycled raw materials. Our downstream sales organization continued to renegotiate and optimize our portfolio of downstream customers of recycled raw materials. For the RDF portfolio, we saw a slight decrease in gross margin in Q3 this year as compared to Q3 last year. In our woodchips portfolio, the trend from previous quarters continued and we had healthy growth in gross margins during Q3 compared to Q3 in We expect that this positive gross margin development will continue. During Q we continued our program for implementing Lean production principles at fifteen processing plants, as well as improving long haul logistics. Our ability to sort paper, increasingly important due to the increased price gap for unsorted paper, remained severely reduced after the fire in March 2018 that destroyed our paper sorting line in Oslo. In Q2 a new state of the art sorting line with improved capacity and quality was ordered with expected delivery during H Going forward we expect increased quality of our recycled raw materials and a further reduction in costs on a per ton basis, due to efficiency gains from implementation of NG Flow throughout the value chain. Leading provider of Project Based recycling Businesses Total revenues in the Project businesses increased by 10.1 % in Q3. The increase was primarily driven by increased volumes of high value fractions in the landfill operations paired with higher activity in the demolition business in the quarter. Adjusted EBITDA increased with 16%. The momentum in Project Based Businesses is strong and we expect the strong performance in Q3 for our landfill operations to continue. The turnaround of our demolition business have been executed successfully and Q3 was a step in a positive direction. We expect this trend to continue going forward. In addition, we see higher activity levels and utilization rates in industrial cleaning. In the Household collection business, challenges associated with the takeover of the old RenoNorden portfolio continued but we expect solid improvements going forward. Recovering results and positive outlook for Q We maintain our full year guiding for Although downstream prices related to paper, plastics and metals are putting pressure on profits we expect improved performance in Recycling and continued strong performance in Project Based Business to continue in Q4 this year. Erik Osmundsen CEO

8 VV Holding AS Q3 Report 2018 Page 8 KEY FINANCIAL FIGURES (NOK 000) Q Q Variance YTD Q YTD Q Variance Total operating income Gross profit (1) Gross margin 50,5 % 49,7 % 0,8 % 56,0 % 50,3 % 5,7 % EBITDA (2) (32 538) EBITDA margin 8,9 % 12,2 % (3,2 %) 19,8 % 10,9 % 8,9 % Adjusted EBITDA (3) (28 922) (83 880) Adjusted EBITDA margin 9,2 % 12,1 % (2,9 %) 6,7 % 10,9 % (4,2 %) Net cash flow from operating activities Capital expenditures (4) Net interest bearing debt (5) ( ) Total assets ( ) Consolidated unaudited figures. Performance measures presented above includes items which are not defined under IFRS. These measures are presented as they are relevant for assessing underlying performance for a given period. (1) Gross profit represents total operating income less cost of goods sold. (2) EBITDA represents operating results before depreciation and amortization. (3) Adjusted EBITDA represents EBITDA adjusted for certain non-recurring and/or non-cash costs. (4) Capital expenditures represents total additions in property, plant and equipment, including items financed by new financial leases. (5) Net interest bearing debt represent total third party indebtness (including shareholder loan from parent) less cash and cash equivalents. RESULTS OF OPERATIONS Total operating income increased by NOK 24.1 million or 2.2% from NOK in Q to NOK million in Q The growth is primarily driven by new contracts in Household Collection and higher activity in Project businesses, partly offset by lower income in both Recycling and Metal. The decline in Recycling is driven by lower paper prices and a reduction in collections assignments. Metal is affected by the Chinese import restrictions and lower sold volumes. Gross profit increased by NOK 20.4 million, or 3.8% from in Q to NOK million in Q Gross margin increased from 49.7% in Q to 50.5% in Q The increase in Gross profit is affected by a change in contract mix where an increased portion of contracts in Household Collection are not operated by subcontractors, thus increasing other operating expenses and reducing COGS. Adjusted EBITDA decreased by NOK 28.9 million from NOK million in Q to NOK million in Q The decline is a driven by impacts on Recycling from reduced downstream prices for paper in the quarter, fewer collection assignments and increased collection costs. Upstream prices are continuously adjusted to account for this, however there is a time lag of one to three months until full adjustment is achieved. Recycling is investing in a new paper sorting machine that will be up and running in the second half of 2019 that will strengthen the divisions competitiveness on paper fractions.

9 VV Holding AS Q3 Report 2018 Page 9 The following table reconciles EBITDA to adjusted EBITDA for the periods indicated: YTD Q YTD Q Consolidated Consolidated (NOK 000) unaudited unaudited EBITDA Change in provision for onerous contract (1) (1 783) (1 645) Gains on sale of real estate (2) ( ) - Other non-recurring expenses (3) Adjusted EBITDA (1) During the fourth quarter 2015, an onerous contract was identified in the Household collection division. A provision of NOK 9.2 million was recognized as other operating expenses in the three and twelve-month periods ending December 31, The contract in question runs until August 2019, with a two year option for the counterpart. An assumption of total contract duration of five years and eight months has been used in the calculation of the estimated loss. (2) During H all five companies in the real-estate portfolio were sold. See note 6 to these interim financial statements for further details. (3) Legal expenses (NOK 0.8 million) and an impairment (NOK 3.0 million) on estimated receivable amount relating to the Scomi case. See note 16 and 21 to the annual report for 2017 for further details regarding this case. The adjustments reconciling EBITDA and adjusted EBITDA represent an illustration of how underlying operational EBITDA has been affected by, what the company perceives to be one-time items. CAPITAL EXPENDITURES Capital expenditures (incl. financially leased vehicles) in property, plant and equipment increased by NOK million, from NOK 80.3 million in the first nine months of 2017 to NOK million in the first nine months of 2018, of which NOK million relates to cash capex and NOK 73.0 relates to new financial lease agreements. Maintenance capex YTD Q is NOK 93.4 million and growth capital investments is NOK million related to new collection vehicles in Division Household Collection and investments in a new paper line in Recycling. CASH FLOW YTD Q YTD Q (NOK 000) Consolidated, unaudited Consolidated, unaudited Net cash flow from operating activities Net cash flow from investing activities (81 103) Net cash flow from financing activities ( ) ( ) Net change in cash and cash equivalents for the period ( ) (87 990) Effect of exchange rate changes (1 637) 760 Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period Net cash flow from operating activities in the first nine months of 2018 showed a net inflow of NOK million, which was NOK million higher than in the same period previous year. The increase compared to previous year is driven by an improvement of working capital due to an agreement where the Group sells accounts receivables. Net cash inflow from investing activities in the first nine months of 2018 was NOK million compared to a net cash outflow of NOK 81.1 million in the same period previous year. The net increase of NOK million is a result of proceeds from the sales of five real-estate companies with net proceeds of NOK million, increased sales of other non-current assets and businesses, a reduced cash outflow related to other financial investments partly offset by increased investments in property, plant and equipment. Net cash outflow from financing activities was NOK 1,009.2 million in the first nine months of 2018 compared to NOK million in the same period previous year. The net increase in cash outflow of NOK million is a result of bond redemptions in May of NOK million and in July of NOK million. The remaining net change stems from a purchase of remaining non-controlling interest in isekk AS (NOK 65.5 million) paired with higher repayments of leasing

10 VV Holding AS Q3 Report 2018 Page 10 liabilities (NOK 10.2 million), lower payment of interest (NOK 14.2) and a draw on the revolving credit facility (NOK 60 million). Cash and cash equivalents fell by NOK million in the first nine months of 2018, from NOK million as of December 31, 2017 to NOK 66.7 million as of September 30, In 2017 cash and cash equivalents fell by NOK 87.2 million in the comparable period. The group has a revolving credit facility totaling NOK 200 million of which NOK 140 million is undrawn as of September 30, FINANCIAL POSITION NET INTEREST BEARING LIABILITIES Net interest bearing debt of the Issuer and its subsidiaries, on a consolidated basis was NOK 1,738.7 million as of September 30, 2018, compared to NOK 2,384.5 million as of December 31, Net interest bearing debt has decreased primarily due to the bond redemptions in May and July of 2018, totaling NOK million. As of September 30, 2018 NOK 1,400 million of the interest bearing debt is swapped from floating to fixed interest rate and will remain around this level until maturity of the bond. CAPITALIZATION The following table sets forth the cash and cash equivalents and capitalization of the Issuer and its subsidiaries, on a consolidated basis. (NOK 000) As of September 30, 2018 As of December 31, 2017 Cash and cash equivalents Indebtedness: Revolving credit facility (1) Leasing liability (2) NOK Senior secured notes (3) Senior bank debt Total third-party indebtedness Shareholder loan (4) Total equity Total capitalization (1) The Issuer has entered into a Revolving Credit Facility Agreement on July 10, 2014 to provide for a Revolving Credit Facility in the amount of NOK million to finance or refinance the general corporate and ongoing working capital needs of the Group. As of september 30, 2018, the Revolving Credit Facility is drawn with NOK 60 million. Accrued, unpaid interest amounted to NOK 0.4 million. (2) The Issuer has entered into a Leasing Facility Agreement on July 10, 2014 in the amount of NOK million to finance the needs of the Group and for investments in collection vehicles in Division Household collection. As of September 30, 2018, the Leasing facility is drawn by NOK million on financial lease agreements. (3) On July 10, 2014 the Issuer conducted a successful placement of a senior secured floating rate note in the amount of NOK 2,235.0 million. As of September 30, 2018 the total amount outstanding, including accrued unpaid interest and unpaid amounts on interest rate swaps are NOK 1,407.5 million. The issuer may, provided that an incurrence test is met, at one or more occasions issue additional bonds under the existing bond agreement up to the amount of NOK 500 million. (4) The shareholder loan is subordinated to all secured senior obligations. As of September 30, 2018 the total amount outstanding, including accrued unpaid interest is NOK million.

11 VV Holding AS Q3 Report 2018 Page 11 OPERATING AND FINANCIAL REVIEW In the first quarter of 2018 the Group changed the internal organization of the business areas which led to a change in the composition of its reportable segments. The following tables reflect these organizational changes, and the comparable period of last year has been restated on the same basis. See note 4 (segment disclosures) for further information regarding the changes. The Group has four major business areas which are presented below. These are Recycling, Metal, Project businesses and Household collection. Adjusted EBITDA in the operating and financial review of the major business areas represents EBITDA as adjusted for certain non-recurring and/or non-cash costs and before allocation of overhead HQ costs. RECYCLING (NOK 000) Q Q Variance YTD Q YTD Q Variance Total revenue (8 823) Adjusted EBITDA (30 502) (72 099) Adjusted EBITDA margin 11,2 % 16,0 % (4,8 %) 9,3 % 13,4 % (4,1 %) YTD Q YTD Q Variance Collection assignments ,2 % Total waste treated (tons) ,1 % Total revenue in Recycling declined with NOK 8.8 million, or 1.4%, from NOK million in Q to NOK million in Q This reduction is mainly driven by reduced downstream prices for paper in the quarter and fewer collection assignments. Year to date total revenue increased by NOK 2.9 million or 0.2% from NOK million in 2017 to million in The increase in revenue is due to a 1.1% increase in waste volumes. Collection assignments are down 5.2% driven by compactor runs, while other logistics activities are up. Adjusted EBITDA has declined with NOK 30.5 million, or 30.9%, from NOK 98.8 million in Q to NOK 68.3 million in Q This reduction is mainly driven by reduced downstream prices for paper in the quarter, fewer collection assignments and increasing costs in collection. Upstream prices are continuously adjusted to account for this, but there is a time lag of one to three months until full adjustment is achieved. Recycling is investing in a new paper sorting machine that will be up and running in the second half of 2019 that will strengthen the divisions competitiveness on paper fractions. METAL (NOK 000) Q Q Variance YTD Q YTD Q Variance Total revenue (19 817) Adjusted EBITDA (2 758) 865 (3 623) (17 810) (37 135) Adjusted EBITDA margin (1,5 %) 0,4 % (1,9 %) (2,7 %) 3,0 % (5,7 %) YTD Q YTD Q Variance Ferrous volumes (tons) ,0 % Non-ferrous volumes (tons) ,0 % Total revenue in Division Metal decreased by NOK 19.8 million, or 9.5%, in Q compared to Q The contraction is predominantly a result of lower volumes sold, especially high priced non-ferrous metals. Furthermore, there has been a significant fall in global downstream price for secondary aluminium scrap related to increased import restrictions, effectively closing the Chinese market. In Q3 2018, adjusted EBITDA decreased by NOK 3.6 million, from NOK 0.9 million in Q to negative NOK 2.8 million. In addition to reduced sales, the drop in profit is driven by lower unit gross margins. For mixed metal scrap there continues to be a price discrepancy between upstream and downstream markets due to the sudden changes in the downstream market. This is expected to be a temporary imbalance resulting from a lag in upstream price adjustments. YTD Q3 volumes are down 6% and 16% for ferrous and non-ferrous respectively. Still, the main cause of profitability remains lower gross margin on mixed metal scrap. The growth in volumes is expected to be more positive going forward.

12 VV Holding AS Q3 Report 2018 Page 12 PROJECT BUSINESSES (NOK 000) Q Q Variance YTD Q YTD Q Variance Total revenue Adjusted EBITDA Adjusted EBITDA margin 14,3 % 13,6 % 0,7 % 12,6 % 9,6 % 2,9 % Total revenue in the Project businesses increased by NOK 15.4 million, or 10.1 %, from NOK million in Q to NOK million in Q The increase in primarily driven by higher activity from landfill operations paired with higher activity in the demolition business in the quarter. YTD revenues increased by NOK 74.0 million or 18.9% from NOK million in 2017 to NOK million in The growth is driven by higher activity across all business areas, with increased volumes of high value fractions in the landfill operations, higher activity levels and utilization rates in industrial cleaning and higher activity in demolitions. Adjusted EBITDA increased with NOK 3.3 million, from NOK 20.7 million in Q to NOK 24.0 million in Q The growth in adjusted EBITDA is driven by increased activity and volumes in landfill operations and improvements in the demolition business. YTD EBITDA increased with NOK 20.8 million from NOK 37.7 million in 2017 to 58.5 million in The increased EBITDA is primarily driven by landfill operations. The demolition business is still performing below expectations, but results from the ongoing turnaround process are positive in the third quarter. HOUSEHOLD COLLECTION (NOK 000) Q Q Variance YTD Q YTD Q Variance Total revenue Adjusted EBITDA (4 292) (28 699) Adjusted EBITDA margin 5,8 % 15,5 % (9,7 %) 2,6 % 18,2 % (15,6 %) Total operating revenues increased both quarter to quarter and year to date. Revenues increased by NOK 37.2 million, or 56.2%, from NOK 66.3 million Q to NOK million in Q Year to date revenues increased by NOK 91.4 million or 46.1%. The startup of new contracts, higher activity on existing contracts and index adjustments contribute to increased revenue comparing both quarterly and year to date against previous year. Adjusted EBITDA decreased both on a quarterly and year to date basis, mainly due to startup costs of new contracts, low profitability on contracts that were taken over following the bankruptcy of Reno Norden and severe weather conditions at the start of 2018.

13 VV Holding AS Q3 Report 2018 Page 13 MARKET CONDITIONS The inventory price risk is related to paper and metals that are discovered in the sorting process of waste (it is not possible to predict these volumes) and the estimation of throughput timing. Inventory positions on Aluminum, Copper and Nickel are being hedged. DEVELOPMENT IN METAL PRICES ALUMINUM LME Aluminium has been trading between USD and USD during Q Various tariff and trading restrictions have not influenced the market significantly in this period. Fundamentals seems to be stable, but sentiment can create unexpected price movements. Further handling of Rusal in the US will give indications on developments for the near future. LME Aluminium 2017 and 2018 COPPER The ongoing trade disputes between the USA and China create a general uncertainty in the market. The copper price went up noticeably in mid-september as a reaction to the latest reports that the tariff dispute between the US and China were less severe than expected together with positive news for infrastructure projects in China. Average forecasts for Q vary between USD and USD per ton. LME Copper 2017 and 2018 NICKEL During Q3 2018, prices for nickel continued to decrease and nickel has been traded at levels between USD USD and USD Nickel prices stabilised in the beginning of October. The underlying demand is good, however volatile conditions are still expected during Q4.

14 VV Holding AS Q3 Report 2018 Page 14 LME Nickel 2017 and 2018 STEEL SCRAP The global tariff and trading restrictions were adopted in the different markets and the prices where rather stable, with a slight upwards trend towards the end of the quarter. The price-leading Turkish steel scrap market was rattled by the record low of the Turkish Lira and inflation concerns in the domestic economy. International prices increased slightly more than the Norwegian Celsa index. DEVELOPMENT IN PAPER PRICES For the packaging grades OCC and mix paper, the price level has been stable in Q3. Deink grades for printing paper have seen a sharp increase and are now back on the level we had early in The price span between packaging grades and printing grades are now on a historical high level. For Q4 we expect packaging grade to remain fairly stable and we believe the sharp increase in Deink grades will level out and remain stable. DEVELOPMENT WASTE-TO-ENERGY WOODCHIPS Prices have stabilised in Q after experiencing large gains in Q2. The Scandinavian market is currently in a short-term equilibrium. Average monthly temperatures during the upcoming winter-months will be influential on future price developments. REFUSE DERIVED FUEL (RDF) The prices for RDF were stable throughout Q3 as expected, and we expect the same trend in Q4. The RDF market has been stable since 2015 and is expected to continue with the same trend in Q and Q

15 VV Holding AS Q3 Report 2018 Page 15 UPDATE OF MATERIAL RISK FACTORS AND EVENTS AFTER REPORTING PERIOD No significant changes in risk factors have been identified. For additional explanations regarding risks and uncertainties, please refer to the Board of Directors Report section Risk and Risk Management and Note 23 Financial Risk Management in the 2017 Annual Report. MATERIAL CHANGES IN LIQUIDITY AND CAPITAL RESOURCES The Group continually analyses its liquidity and capital resources position. The Group has assessed its currently available capital resources and its current liquidity position as satisfactory. EVENTS AFTER REPORTING PERIOD There has not been any significant events after the reporting period.

16 VV Holding AS Q3 Report 2018 Page 16 CONDENSED INTERIM FINANCIAL STATEMENTS INTERIM CONSOLIDATED STATEMENT OF PROFIT OR LOSS (NOK 000) Note Q Q YTD Q YTD Q Revenue 4, Other income Total operating income Cost of goods sold Employee benefits expense Depreciation/amortization/impairment Other operating expenses Other (gains)/losses - net (1 757) (3 483) Operating profit Finance income Finance costs Share of profit in associated companies Profit / (loss) before income tax Income tax expense (11 110) Profit / (loss) for the period from continuing operations Profit / (loss) attributable to: Owners of the parent Non-controlling interests The interim financial information has not been subject to audit.

17 VV Holding AS Q3 Report 2018 Page 17 INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (NOK 000) Q Q YTD Q YTD Q Profit / (loss) for the period Items that may be subsequently reclassified to profit or loss Currency translation differences 329 (1 416) (2 741) Interest rate swaps - cash flow hedges (after tax) Net other comprehensive income / (loss) for the period Comprehensive income / (loss) for the period Comprehensive income attributable to: Owners of the parent Non-controlling interests The interim financial information has not been subject to audit.

18 VV Holding AS Q3 Report 2018 Page 18 INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS (NOK 000) Sep 30, 2018 Dec 31, 2017 Non-current assets Property, plant & equipment Intangible assets Goodwill Deferred tax assets Investments in associated companies Other receivables Total non-current assets Current assets Inventories Trade and other receivables Other financial assets Cash and cash equivalents Assets held for sale Total current assets Total assets The interim financial information has not been subject to audit.

19 VV Holding AS Q3 Report 2018 Page 19 INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION EQUITY AND LIABILITIES (NOK 000) Sep 30, 2018 Dec 31, 2017 Equity Share capital and reserves attributable to owners of parent Non-controlling interest Total equity Non-current liabilities Loans and borrowings Other financial liabilities Deferred income tax liabilities Post-employment benefits Provisions for other liabilities and charges Total non-current liabilities Current liabilities Trade and other payables Current income tax Loans and borrowings Other financial liabilities Provisions for other liabilities and charges Total current liabilities Total liabilities Total equity and liabilities The interim financial information has not been subject to audit.

20 VV Holding AS Q3 Report 2018 Page 20 INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (NOK 000) YTD Q YTD Q Profit / (Loss) before income tax Adjustments for: Income tax paid (12 304) (2 911) Depreciation, amortization and impairment charges Net (gain) loss on sale of non-current assets and business ( ) (8 005) Financial items without cash effect (6 678) Items classified as investing- or financing activities Changes in other short term items ( ) Net cash flow from operating activities Purchase of shares in subsidiaries and associates (5 396) (9 000) Proceeds from sale of business Payments for purchases of non-current assets ( ) (75 287) Proceeds from sale of non-current assets Net other investments - (11 420) Dividend from associated companies Net cash flow from investing activities (81 103) Proceeds from borrowings Repayment of borrowings ( ) (2 358) Debt related expenses (1 090) (3 217) Repayment of financial leasing liability (31 062) (20 910) Dividends paid to non-controlling interest (4 635) (5 355) Transactions with non-controlling interest (65 485) - Interest paid ( ) ( ) Net cash flow from financing activities ( ) ( ) Net increase in cash and cash equivalents ( ) (87 990) Effect of exchange rate changes (1 637) 760 Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period The interim financial information has not been subject to audit.

21 VV Holding AS Q3 Report 2018 Page 21 INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONDENSED STATEMENT OF CHANGES IN EQUITY YTD Q (NOK 000) Attributable to the owners of the parent Non-controlling interest Total equity At 1 January Profit / (loss) Net other comprehensive income / (loss) Transactions with non-controlling interest (61 193) (9 865) (71 058) Non-controlling interest on acquisition of subsidiary Group contributions (2 661) - (2 661) At 30 September CONDENSED STATEMENT OF CHANGES IN EQUITY YTD Q (NOK 000) Attributable to the owners of the parent Non-controlling interest Total equity At 1 January Profit / (loss) YTD Net other comprehensive income / (loss) Transactions with non-controlling interest - (5 355) (5 355) Group contributions (7 597) - (7 597) At 30 September The interim financial information has not been subject to audit.

22 VV Holding AS Q3 Report 2018 Page 22 NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - ACCOUNTING PRINCIPLES VV Holding AS is controlled by funds managed by Summa Equity. VV Holding controls the Norsk Gjenvinning-group. These interim condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required for full annual financial statements and should be read in conjunction with the Annual Report These condensed consolidated interim financial statements have not been audited or subject to a review by the auditors. Accounting principles applied in the preparation of these condensed consolidated interim financial statements for the period ended September 30, 2018, are consistent with those applied in the annual consolidated financial statements for 2017, with the exception of changes in accounting policies disclosed below. Comparative prior period information has been prepared on the same basis as current period information. All figures refer to thousands of Norwegian kroner (NOK 000) unless otherwise specified. Changes in accounting policies from January 1, 2018 As of January 1, 2018 the Group adopted IFRS 15 Revenue from customer contracts. As described in chapter of the Groups Annual report for 2017, the new standard was implemented with the use of the modified retrospective approach, and there were no implementation effects. Compared to the previous accounting principles for revenue recognition there are no changes in the timing or amount of revenue recognised. Significant accounting policy revenue recognition The Group recognizes revenue when performance obligations in the customer contracts are met, through a transfer of a promised services or goods. Revenue is measured at the amount the Group expects to receive in exchange for the transfer of services or goods. Upstream sales of services- the Group provides a broad spectrum of waste related services, which primarily relates to collection and treatment of various forms of waste, including other specialized services. Sale of services is typically recognised as the Group have retrieved/received waste at our facilities or in line with performance of services. Downstream sales of recycled raw materials - based on sorted waste collected in the upstream marked and purchased goods, the Group produce recycled raw materials which are sold in the downstream market. The Groups main products are both ferrous and non-ferrous metals and paper. Revenues from sale of recycled raw materials are typically recognised at the point in time when delivery to the customer have occurred. For further details relating to revenue from customer contracts, refer to notes 4 and 5. Other changes Previous year the line item Revenue in the interim statement of profit or loss included rental income from real estate. The Group have changed the presentation of this income stream and this is now presented as Other income. Comparable amounts have been restated to reflect this change in accounting policy. See note 6 for further details on Other income. The Group implemented IFRS 9 as of January 1, As described in chapter of the Groups Annual report for 2017, there were no implementation effects. The Group has elected to make use of the simplified approach as described in IFRS 9.

23 VV Holding AS Q3 Report 2018 Page 23 NOTE 2 - FINANCIAL ITEMS (NOK 000) Q Q YTD Q YTD Q Interest income Other financial income Financial income Non cash interest expenses Cash interest expenses Other financial expenses (6 088) Financial expenses Net financial income (expenses) (42 365) (35 969) ( ) ( ) The line item other financial expenses includes impairment charges of NOK 5.8 million in Q3 2018, relating to investment and loan to an associated company. The change in other financial expenses from 2017 is primarily a result of net positive effects of currency (agio) in Q3 of 2017 on a YTD disagio position. NOTE 3 - SENIOR SECURED FLOATING RATE NOTES On July 10 (the Issue Date), 2014 VV Holding AS (the Issuer) issued Senior Secured Floating Rate Notes (the Bond) in the amount of NOK 2,235 million. The Bond matures on July 10, 2019 (the Maturity Date) and is to be repaid in full at the Maturity Date. Interest is set quarterly at NIBOR bp. The Issuer may, provided that the incurrence test is met, at one or more occasions issue additional bonds under the Bond agreement, in the amount of up to NOK 500 million, up to five (5) business days prior to the Maturity Date. The incurrence test is met if the ratio of Net Interest Bearing Debt to EBITDA, as defined in the Bond agreement, is not greater than: 5.00 prior to the date falling 18 months after the Issue Date 4.50 from and including the date falling 18 months after the Issue Date to, but not including, the date falling 48 months after the Issue Date 4.00 from and including the date falling 48 months after the Issue Date to, but not including the Maturity Date. The bonds are listed on the Oslo Stock Exchange. For further information about the Bond, we refer to the Bond agreement. Redemption of bonds: In May of 2018 bonds with a face value of NOK 109 million was redeemed. In July of 2018 bonds with a face value of NOK 740 million was redeemed. Outstanding face value of the bond as of September 30, 2018 is NOK 1,386 million. NOTE 4 - SEGMENT NOTE Currently the reportable operational segments in the group compromise of Recycling, Metal, Project businesses and Household collection. The category All other segments consist of the operating segments Downstream and Security Shredding, which are not reportable. HQ and eliminations consist of the head office and holdings together with real estate and eliminations. During the first quarter of 2018 the Group changed the internal organization which led to a change in the composition of its reportable segments. The following tables reflects these organizational changes in the reportable segments, and the prior period have been restated on the same basis. The former operational segments Danish Industrial services and Landfill operations is now part of the segment Project businesses. Further there have been a change in the composition between Metal and Downstream where activities formerly reported in the Downstream segment now is part of the segment Metal.

24 VV Holding AS Q3 Report 2018 Page 24 Group management executives is the group s chief operating decision-maker (CODM). Management has determined the operating segments based on the information reviewed by the Group management executives for the purposes of allocating resources and assessing performance. Revenue 2018 Q3 (NOK 000) Recycling Metal Project Businesses Household Collection All other segments HQ and Eliminations Total Norway Other Nordics Other Europe Intra segment (31 277) - Total upstream (31 250) Norway Other Nordics Other Europe Asia Intra segment (28 001) - Total downstream (28 001) Total Revenue (59 251) Revenue 2017 Q3 (NOK 000) Recycling Metal Project Businesses Household Collection All other segments HQ and Eliminations Total Norway Other Nordics Other Europe Intra segment (19 128) - Total upstream (19 083) Norway Other Nordics Other Europe Asia Intra segment (30 603) - Total downstream (30 603) Total Revenue (49 686) Revenue 2018 YTD Q3 (NOK 000) Recycling Metal Project Businesses Household Collection All other segments HQ and Eliminations Total Norway Other Nordics Other Europe Intra segment (77 410) - Total upstream (77 294) Norway Other Nordics Other Europe Asia Intra segment (93 591) - Total downstream (93 591) Total Revenue ( )

25 VV Holding AS Q3 Report 2018 Page 25 Revenue 2017 YTD Q3 (NOK 000) Recycling Metal Project Businesses Household Collection All other segments HQ and Eliminations Total Norway Other Nordics Other Europe Intra segment (59 845) - Total upstream (59 722) Norway Other Nordics Other Europe Asia Intra segment (83 574) - Total downstream (83 574) Total Revenue ( ) CODM assesses the performance of the operating segments based on EBITDA before allocation of overhead HQ costs. Interest income and expenditure are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the group. Consolidated balance sheet values are not reported to the CODM at the segment level. EBITDA BEFORE INTERNAL CHARGES (NOK 000) Q Q YTD Q YTD Q Recycling Metal (2 758) 865 (17 810) Project businesses Household collection All other segments HQ and eliminations (2 355) (5 065) (3 960) Total Depreciation and amortization expense (45 731) (54 114) ( ) ( ) Finance income Finance costs (45 421) (37 137) ( ) ( ) Net income from associated companies Profit before tax

26 VV Holding AS Q3 Report 2018 Page 26 NOTE 5 REVENUE The Groups business is focused around providing local services to customers in need of waste related services (upstream market) and provide recycled raw materials to industrial customers (downstream market). (NOK 000) Q Q YTD Q YTD Q Upstream sale of services Downstream sale of recyclables Revenue Upstream sale of services The Group provides a broad spectrum of waste related services in Norway and other Nordic countries. Activities relate primarily to collection and treatment of various forms of waste, including other specialized services. Upstream services aimed at these local markets are in the Group located in Recycling, Downstream and the niche businesses (Project businesses, Household Collection and Security Shredding). Sale of services is typically recognised at as the Group have retrieved/received the waste at our facilities or in line with the performance of services. Downstream sale of recycled raw materials The Groups three divisions (Metal, Recycling and Downstream) sell recycled raw materials, which are produced, based on sorted waste collected in the upstream marked and purchased goods. The Groups main products are both ferrous and nonferrous metals and paper. Revenues related to the downstream market are significantly affected by the development in commodity prices and foreign exchange rates as the Group sells goods in an international market. Sale of recycled raw materials are typically recognised at the point in time when delivery to the customer have occurred. Implementation of IFRS 15 As of January 1, 2018 the Group adopted IFRS 15 Revenue from customer contracts. As described in chapter of the Groups Annual report for 2017, the new standard was implemented with the use of the modified retrospective approach, and there were no implementation effects. The updated significant accounting policies for revenues is disclosed in note 1 to these interim financial statements. The line item Revenue in the interim statement of profit or loss is entirely related to revenue from customer contracts. NOTE 6 OTHER INCOME (NOK 000) Q Q YTD Q YTD Q Gain on sale of held for sale assets Rental income from real estate Insurance recovery Other gains on sale Other income Other gains on sale In Q3 of 2018 the group performed a business combination in which a subsidiary was used as consideration in the transaction, and was measured at fair value. This transaction gave rise to a gain on sale of NOK 6.1 million. See note 7 for further details on the business combination. Gain on sale of held for sale assets As disclosed in the second quarter report, the Group sold assets held for sale. These transactions gave rise to a total gain on sale of NOK 501 million.

27 VV Holding AS Q3 Report 2018 Page 27 NOTE 7 BUSINESS COMBINATIONS The Group gained control over the two smaller subsidiaries Mortens Rørinspeksjon AS (MRI) and LST AS (LST). Total consideration for the businesses was NOK 13.9 million of which NOK 5.1 million cash and NOK 8.8 million in fair value of subsidiary used as consideration. The Group owns 50.6% of MRI and 100% of LST as of September 30, The table below summarizes preliminary PPAs performed for the two business combinations. These are subject for changes going forward as the measurement of identifiable assets is not complete at the date of these interim financial statements. (NOK 000) Preliminary PPA Deferred tax assets Property, plant and equipment Receivables Payables Net identifiable assets Goodwill Total consideration Of which non-controlling interest Total consideration for NG Group NOTE 8 - EVENTS AFTER THE REPORTING PERIOD There has not been any significant events after the reporting period.

28 NOTES TO THE CONDENSED FINANCIAL STATEMENTS RESPONSIBILITY STATEMENT NOTES TO THE CONDENSED FINANCIAL STATEMENTS VV Holding AS Q3 Report 2018 Page 28 We confirm that, to the best of our knowledge, the condensed interim financial statements for the nine months ended on September 30, 2018 which have been prepared in accordance with IAS 34 Interim Financial Reporting give a true and fair view of the Group s consolidated assets, liabilities, financial position and results of operations, and that the interim report includes a fair review of the information under the Norwegian Securities Trading Act section 5 6 fourth paragraph. Lysaker, November 15, 2018 Ole Enger Chairman of the Board (sign.) Per-Anders Hjort Deputy Chairman of the Board (sign.) Reynir Kjær Indahl Director (sign.) Erik Osmundsen Chief Executive Officer (sign.) Christian Melby Director (sign.) Roy Jenshagen Director (sign.) Lasse Stenskrog Director (sign.) Cecilie Skauge Director (sign.)

29 VV Holding AS Q3 Report 2018 Page 29 APPENDIX 1 ALTERNATIVE PERFORMANCE MEASURES In the financial statements the Group presents performance measures which are not defined under IFRS. These performance measures is categorized as Alternative Performance Measures (APM). APM Definition Why APM gives useful information Operating profit The number is directly derived from the statement of profit or loss Commonly used measure of profitability. EBITDA Calculated as profit before depreciation, impairment, financial income, financial expense, income from associated companies and tax. The number comes directly from the statement of profit or loss. Commonly used measure of profitability. Group management believe that the adjusted performance measure gives Adjusted EBITDA more relevant information for analytical = EBITDA +/- any element (positive or purposes and to make representations. negative) with character of being a onetime event, non-recurring, extra The elements which are excluded is considered to give limited relevance for ordinary, unusual or exceptional. evaluation of historic and future performances for the Group as it is at period end. EBITDA before internal charges Net debt Debt ratio = EBITDA before allocation of headquarter cost to the segments. = non current debt to credit institutions + current debt to credit institutions + nominal value senior secured note bond + incurred interest expense senior secured note bond cash and cash equivalents = adjusted EBTIDA / net debt Group management believe that the adjusted performance measure gives more relevant information for consideration of profitability and resource allocation to segments. Commonly used measure of a companies debt financing. Commonly used measure for capital management.

30 VV Holding AS Q3 Report 2018 Page 30 CONTACTS Dean Zuzic CFO Phone: Published by VV Holding AS 15th November 2018